PRVAX TFBVX. Virginia Tax-Free Bond Fund Virginia Tax-Free Bond Fund I Class. SEMIANNual REPORT

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1 SEMIANNual REPORT August 31, 2017 PRVAX TFBVX T. Rowe Price Virginia Tax-Free Bond Fund Virginia Tax-Free Bond Fund I Class The fund primarily invests in high-quality Virginia municipal bonds and is well suited for investors seeking income that is exempt from federal and Virginia state income taxes.

2 HIGHLIGHTS Municipal bonds produced solid gains during the fund s reporting period, supported by steady demand and limited new issuance. Longerterm municipals outperformed shorter maturities as the yield curve flattened, and lower-rated bonds outpaced higher-quality securities as investors continued to seek out higher yields. The Virginia Tax-Free Bond Fund produced positive returns and outperformed its peer group average during the first half of its fiscal year. The fund s revenue bond overweight, concentration in health care and transportation securities, and lower-quality holdings contributed to the fund s strong results. Virginia s debt burden has grown but is still manageable. While Virginia does not face as dire a crisis in pension liabilities as some other states, we are concerned at the growth in the unfunded portion of its pension system. While the uncertainties surrounding tax reform and the increased chance of rising yields represent near-term headwinds for broad muni market performance, we believe fundamentals are sound overall and global economic uncertainties could spur demand for the asset class. The views and opinions in this report were current as of August 31, They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. REPORTS ON THE WEB Sign up for our Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.

3 Manager s Letter Fellow Shareholders Tax-free municipal bonds produced solid gains and outperformed taxable investmentgrade bonds in the six-month period ended August 31, The Bloomberg Barclays Municipal Bond Index returned 3.79% versus 2.74% for the Bloomberg Barclays U.S. Aggregate Bond Index. Muni bonds were supported by steady demand and limited new issuance for most of the period. Longer-term municipals outperformed shorter maturities as the yield curve flattened, and lower-rated bonds outpaced higher-quality securities as investors continued to seek out higher yields. The Virginia Tax-Free Bond Fund outperformed its peer group in the six-month period, and the fund s longer-term relative performance record remains favorable. ECONOMY AND INTEREST RATES The U.S. economy grew at a strong 3.0% annualized rate in the second quarter of 2017, according to the Commerce Department s most recent estimate a pickup from the 1.2% growth rate in the first quarter. The labor market has been healthy, with the national unemployment rate easing to 4.4% in August. Inflation data were very weak in the early months of our reporting period, but more recently pricing pressures have shown signs of normalizing. While Hurricane Harvey is having a significant impact on the highly populated and energy-dependent region around Houston, Texas, we believe the national economic effects of the storm will be short-lived. With specific regard to the municipal bond market, we believe that while Harvey may add some operating costs to impacted issuers over the short term, insurance often offsets some of these costs and local governments will receive federal aid and state support that should allow them to recover without any significant long-term impacts. 1

4 6% The Federal Reserve raised short-term interest rates in March and in June, lifting the fed funds target rate to the 1.00% to 1.25% range. The Fed has now raised rates four times since late 2015, and central bank officials are expected to raise rates once more in Year AAA General Obligation The Fed is also poised 5-Year AAA General Obligation to begin unwinding its 7-Day Municipal Securities $4.5 trillion balance sheet, a legacy of its massive purchases of Treasury bonds and mortgagebacked securities in the aftermath of the 2008 financial crisis. Municipal Yields 8/31/16 11/16 2/17 5/17 8/31/17 Sources: Municipal Market Data and T. Rowe Price Associates. 7-day yields consist of the average of all municipal variable rate demand notes considered by T. Rowe Price to be eligible money market fund investments. Both the Treasury and municipal yield curves flattened in the first half of our fiscal year, with short-term municipal yields moving incrementally higher, while short-term Treasury rates increased to a greater degree, as they were more sensitive to the Fed s rate hikes. Intermediate- and long-term yields decreased, with the move lower being more pronounced in the muni market. At the end of August, high-quality 30-year muni yields were slightly lower than the 30-year U.S. government bond yield. Nonetheless, municipals still offer relative value for many fixed income investors on an after-tax basis. As an illustration of their relative attractiveness, on August 31, 2017, the 2.70% yield offered by a 30-year tax-free general obligation (GO) bond rated AAA was about 99% of the 2.73% pretax yield offered by a 30-year Treasury bond. Including the 3.8% net investment income tax that took effect in 2013 as part of the Affordable Care Act, the top marginal federal tax rate currently stands at 43.4%. An investor in this tax bracket would need to invest in a taxable bond yielding 4.77% to receive the same after-tax income as that generated by the municipal bond. (To calculate a municipal bond s taxable-equivalent yield, divide the yield by the quantity of 1.00 minus your federal tax bracket expressed as a decimal in this case, , or ) 2

5 When Less Is Really More Despite low nominal yields, municipal bonds remain attractive for investors facing high income taxes. The interest income from a tax-free municipal bond is exempt from federal income taxes.* In addition, most states and cities do not tax income earned on their own bonds for their residents. A municipal bond could, therefore, be triple-tax-free exempt from federal, state, and local taxes. Tax-free municipal bond income is also exempt from a net investment income tax that took effect in 2013, in which a 3.8% tax is imposed on the lesser of your total net investment income or your modified adjusted gross income in excess of $250,000 (for married couples filing jointly) or $200,000 for single individuals. Even though munis typically pay less than taxable issues, investors in the highest tax brackets are likely to realize higher after-tax, bottom-line results from tax-exempt securities. As you can see in the table below, an investor in the 33% federal tax bracket would need to purchase a taxable security yielding 7.5% to match the after-tax return of a municipal security yielding 5.0%. Factoring in state and local income tax rates which, of course, will vary widely makes calculating the taxable-equivalent yield more complicated. However, the taxable-equivalent yields listed in the table would be even higher. This underscores the advantage of tax-free income provided by municipal securities. Tax-Exempt Yields Tax-Exempt Yields and Taxable-Equivalent Yields Taxable-Equivalent Yields Your Federal Marginal Tax Bracket 25.0% 28.0% 33.0% 36.8%** 38.8%** 43.4%** 1.0% 1.3% 1.4% 1.5% 1.6% 1.6% 1.8% * Some municipal bond income may be subject to the federal alternative minimum tax (AMT). ** These federal marginal tax brackets include an additional 3.8% net investment income tax. Note: When comparing yields in this manner, make sure to compare securities or mutual funds of similar credit quality and maturity or the comparison will not be valid. This chart is for illustrative purposes only and does not represent the performance of any specific security. 3

6 MUNICIPAL MARKET NEWS Total year-to-date municipal bond issuance through the end of August was about $256 billion, according to The Bond Buyer, which was 15% lower than the same period in A sharp drop in refunding issuance drove the decline in supply. Fund flows have been mostly positive during the last six months and, combined with lower supply, created a strong technical backdrop for muni bonds. Generally, fundamentals for municipal issuers remain solid, and most issuers in the $3.8 trillion municipal bond market have been fiscally responsible. State and local governments in general have been cautious about adding to indebtedness since the 2008 financial crisis, and a strengthening economy has helped tax revenues rebound. Over 60% of the market, as measured by the Bloomberg Barclays Municipal Bond Index, is AAA or AA rated. Although the market is overwhelmingly high quality, many states and municipalities are grappling with underfunded pensions and other post-employment benefit (OPEB) obligations. New reporting rules from the Governmental Accounting Standards Board are bringing greater transparency to state and local governments pension funding gaps, long-term risks that investors often overlooked in the past. We believe the market will increasingly price in higher pension risks as the magnitude of unfunded liabilities becomes more conspicuous. In credit news, the deteriorating fiscal situation in Illinois drew increased scrutiny as political dysfunction led to yet another budget impasse. Moody s Investors Service and S&P Global Ratings downgraded Illinois general obligation debt to the lowest investmentgrade level after the state s regular legislative session ended on May 31 without a budget. The Democrat-controlled state legislature returned for a special session at the end of June and finally passed a budget despite the objections of Governor Bruce Rauner, a Republican, who had vetoed the deal because of its significant tax increases and lack of long-term reforms. In May, Puerto Rico s financial oversight board filed petitions with the U.S. District Court seeking help in restructuring approximately $51 billion in debt issued directly by the island s central government as well as the commonwealth s COFINA debt, which is backed by sales tax revenue. In early July, PREPA, the commonwealth s electric utility, filed for bankruptcy after the oversight board rejected the restructuring agreement that had been reached between the power authority and its creditors. The court filings could lead to the largest restructuring of 4

7 municipal debt in U.S. history. While credit-challenged Among muni issuers such as Illinois and Puerto Rico made headlines during our reporting period, the negative investment-grade news seemed to have little impact on the broader revenue bonds, tax-exempt bond market. all subsectors Sector performance across the muni market was broadly positive, as revenue bonds narrowly produced positive outperformed general obligation debt. We continue returns to favor bonds backed by a dedicated revenue stream over GOs, as we consider revenue bonds to be largely insulated from the pension funding concerns facing state and local governments. Among investment-grade revenue bonds, all subsectors produced positive returns, with hospital and leasing revenue bonds performing well, while resource recovery bonds lagged. High yield tobacco debt gained more than 7% and was the strongestperforming sector in the muni market. VIRGINIA MARKET NEWS Virginia s economy remains predominantly sound. The commonwealth s 3.8% unemployment rate in July 2017 was down slightly from 4.1% a year earlier and compares favorably with the national rate. Virginia s population growth has slowed from a consistent 1.0% per year in previous years to 0.5% in Virginians remain relatively wealthy, with per capita income in the first quarter of 2017 ranking 10th among the states at 109% of the national average. Employment growth over the past year has been good at 0.9%, but it was a bit slower than the 1.6% national growth rate. For the fiscal year ended June 30, 2017, unaudited general fund revenues (at $20 billion on a cash basis) grew by 3.4% compared with the prior year and were favorably above final budget expectations of 2.6% growth. Most of the outperformance was due to higher-thanexpected personal income tax collections. Still, expenditures were higher than revenues, reducing the commonwealth s total general fund balance by $139 million to $1.3 billion. The 2017 amended budget bill (which covers fiscal 2018) makes reductions to general fund spending while also increasing revenues. Despite these measures, fiscal year 2018 projects a budget shortfall that will necessitate continued transfers from reserves built up over prior years to offset the gap. 5

8 Virginia has historically enjoyed a favorable reserve profile, although the recent budgetary shortfall has reduced the size of the Revenue Stabilization Fund, the commonwealth s rainy day fund. The fund held $841 million, or 4.3% of revenues, as of June 30, 2016; however, it held a lower $549 million, or 2.7% of revenues, as of June 30, Virginia plans a withdrawal of $272 million from the rainy day fund in fiscal While the commonwealth s fiscal position and liquidity compare favorably with that of other states, we are keeping a close eye on monthly revenue performance versus the budget. Officials have always been proactive in managing Virginia s finances, and we continue to take comfort in their solid record of fiscal stewardship. Virginia s debt burden has grown but is still manageable. The commonwealth has $12.5 billion of total net tax-supported debt outstanding, ranking it in the top half among states when measured by debt per capita and debt relative to personal income, according to Moody s Investors Service. While Virginia does not face as dire a crisis in pension liabilities as some other states, we are concerned at the growth in the unfunded portion of its pension system. As of June 30, 2016 (the most recent data available), the Virginia Retirement System (VRS) was funded at 72%. The unfunded portion of VRS was high, at $25 billion as of June 30, 2016, and has been rising as the commonwealth set its statutory contribution below what was recommended by its actuaries. Virginia s unfunded liabilities associated with OPEB are modest in comparison with other states. The state s credit rating AAA at all three major rating agencies reflects its relatively favorable fiscal position, pension concerns notwithstanding. However, in April S&P placed Virginia on a negative outlook based on the commonwealth s recent structural imbalance and planned use of reserves. PORTFOLIO REVIEW The Virginia Tax-Free Bond Fund returned 3.14% for the six-month period ended August 31, 2017, outperforming the Lipper Virginia Municipal Debt Funds Average, which returned 2.46%. Our revenue bond overweight, our concentration in health care and transportation securities, and our lower-quality holdings contributed to the fund s strong results versus its peers. 6

9 Performance Comparison Six-Month Period Ended 8/31/17 Total Return Virginia Tax-Free Bond Fund 3.14% Lipper Virginia Municipal Debt Funds Average 2.46 The fund s longer-term performance is also solid, placing it in the top quartile in its peer group over the past three- and five-year periods and top decile for the 10-year period. Based on cumulative total returns, Lipper ranked the Virginia Tax- Free Bond Fund 14 of 32, 7 of 30, 3 of 27, and 2 of 23 funds in the Virginia municipal debt funds universe for the 1-, 3-, 5-, and 10-year periods ended August 31, 2017, respectively. (Past performance cannot guarantee future results.) The fourth quarter of 2016 battered the municipal market and our returns across the board and brought us into 2017 in a cautious mood. Over the course of 2017, we have modestly increased our interest rate risk from its more moderate position at the outset of the period. We Portfolio Characteristics Periods Ended 2/28/17 8/31/17 Virginia Tax-Free Bond Fund Share Price $11.90 $12.08 Dividends Per Share For 6 months For 12 months SEC Yield (30-day) 2.11% 1.79% Virginia Tax-Free Bond Fund I Class Share Price $12.08 Dividends Per Share Since Inception 7/6/ SEC Yield (30-day) 1.86% Weighted Average Maturity (years) Weighted Average Duration (years) month dividends may not equal the combined 6-month figures due to rounding. extended our average maturity to 16.7 years from 16.1 years while the fund s duration ticked up to 4.6 years from 4.5 years. Overall, our interest rate positioning contributed moderately to our relative returns. At the sector level, our revenue bond overweight and our concentration in transportation and health care bonds, both long-term strategic positions, enhanced our overall absolute and relative returns for the six-month period. Correspondingly, our position in general obligation bonds is light when compared with the overall market. 7

10 Portfolio Diversification Percent of Net Assets 2/28/17 8/31/17 Transportation 22.1% 25.0% Health Care Prerefunded Water and Sewer Education Special Tax General Obligation Local Housing Other Assets and Reserves Total 100.0% 100.0% Our transportation holdings increased to 25% from 22.1% during the period, while our position in the health care sector, which is primarily made up of hospitals, rose to 19.9% from 19.2%. These totals differ markedly from the broader market and a sampling of our peers and reflect our view that these sectors offer attractive risk-adjusted yields. Historical weightings reflect current industry/sector Revenue bonds classifications. transportation and hospital bonds in particular produced some of our best returns for the period. In transportation, we added to our holdings of 95 Express Lanes, Metropolitan DC Airport Authority, and the Washington DC Quality Diversification BBB 10% A 17% Not Rated 6% AAA 17% AA 50% Based on net assets as of 8/31/17. Sources: Moody s Investors Service; if Moody s does not rate a security, then Standard & Poor s (S&P) is used as a secondary source. When available, T. Rowe Price will use Fitch for securities that are not rated by Moody s or S&P. T. Rowe Price does not evaluate these ratings but simply assigns them to the appropriate credit quality category as determined by the rating agency. Prerefunded securities are rated based on their current prerefunded status, regardless of which nationally recognized statistical rating organization provided the original rating. Metropolitan Area Transportation Authority. In health care, our purchases included Centra Health (a health care system based in Lynchburg) and Westminster Lake Ridge, a retirement facility in Prince William County. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) Regarding the portfolio s credit quality, we continue to emphasize A rated and lower purchases when we can, though the most 8

11 recent six months saw more additions of AA rated securities. Overall, the portfolio remains high quality, with an average credit quality rating of AA. OUTLOOK We believe that the municipal bond market remains a high-quality market that offers good opportunities for long-term investors seeking tax-free income. While the uncertainties surrounding tax reform and the increased chance of rising yields represent near-term headwinds for broad muni market performance, we believe fundamentals are sound overall and global economic uncertainties could spur demand for the asset class. As the Fed continues on the path to interest rate normalization, muni bond yields are likely to rise along with Treasury yields although probably not to the same extent. While higher yields pressure bond prices, munis should be less susceptible to slowly rising rates than Treasuries given their attractive tax-equivalent yields and the steady demand for tax-exempt income. We expect any potential Fed rate increases to be gradual and modest and believe we could remain in a relatively low rate environment for some time. While we believe that many states deserve high credit ratings and will be able to continue servicing their debts, we have longer-term concerns about significant funding shortfalls for pensions and OPEB obligations in some jurisdictions. These funding gaps stem from investment losses during the 2008 financial crisis, insufficient plan contributions over time, and unrealistic return assumptions. Although few large plans are at risk of insolvency in the near term, the magnitude of unfunded liabilities is becoming more conspicuous in a few states. Ultimately, we believe independent credit research is our greatest strength and will remain an asset for our investors as we navigate the current market environment. As always, we focus on finding attractively valued bonds issued by municipalities with good long-term fundamentals an investment strategy that we believe will continue to serve our investors well. 9

12 Thank you for investing with T. Rowe Price. Respectfully submitted, Hugh D. McGuirk Chairman of the Investment Advisory Committee September 21, 2017 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund s investment program. 10

13 Risks of Investing in Fixed Income Securities Bonds are subject to interest rate risk (the decline in bond prices that usually accompanies a rise in interest rates) and credit risk (the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default by failing to make timely payments of interest or principal), potentially reducing the fund s income level and share price. The fund is less diversified than one investing nationally. Some income may be subject to state and local taxes and the federal alternative minimum tax. Glossary Bloomberg Barclays Municipal Bond Index: A broadly diversified index of tax-exempt bonds. Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that tracks domestic investment-grade bonds, including corporate, government, and mortgagebacked securities. Duration: A measure of a bond fund s sensitivity to changes in interest rates. For example, a fund with a duration of five years would fall about 5% in price in response to a one-percentage-point rise in interest rates, and vice versa. Federal funds rate (or target rate): The interest rate charged on overnight loans of reserves by one financial institution to another in the United States. The Federal Reserve sets a target federal funds rate to affect the direction of interest rates. General obligation (GO) debt: A government s strongest pledge that obligates its full faith and credit, including, if necessary, its ability to raise taxes. Lipper averages: The averages of available mutual fund performance returns for specified time periods in categories defined by Lipper Inc. Other post-employment benefits (OPEB): Benefits paid to an employee after retirement, such as premiums for life and health insurance. Prerefunded bond: A bond that originally may have been issued as a general obligation or revenue bond but that is now secured by an escrow fund consisting entirely of direct U.S. government obligations that are sufficient for paying the bondholders. Revenue (or revenue-backed) bond: A bond issued to fund specific projects, such as airports, bridges, hospitals, or toll roads, where a portion of the revenue generated is used to service the interest payments on the bonds. SEC yield (30-day): A method of calculating a fund s yield that assumes all portfolio securities are held until maturity. Yield will vary and is not guaranteed. 11

14 Glossary (continued) Weighted average maturity: A measure of a fund s interest rate sensitivity. In general, the longer the average maturity, the greater the fund s sensitivity to interest rate changes. The weighted average maturity may take into account the interest rate readjustment dates for certain securities. Money funds must maintain a weighted average maturity of less than 60 days. Yield curve: A graph depicting the relationship between yields and maturity dates for a set of similar securities. A security with a longer maturity usually has a higher yield. If a short-term security offers a higher yield, then the curve is said to be inverted. If shortand long-term bonds are offering equivalent yields, then the curve is said to be flat. Note: Bloomberg Index Services Ltd. Copyright 2017, Bloomberg Index Services Ltd. Used with permission. 12

15 Performance and Expenses Growth of $10,000 This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. VIRGINIA TAX-FREE BOND FUND $20,000 18,000 16,000 14,000 12,000 10,000 As of 8/31/17 Virginia Tax-Free Bond Fund $15,530 Bloomberg Barclays Municipal Bond Index $15,870 Lipper Virginia Municipal Debt Funds Average $13,935 8/07 8/08 8/09 8/10 8/11 8/12 8/13 8/14 8/15 8/16 8/17 Note: Performance for the I Class will vary due to its differing fee structure. See returns table below. Average Annual Compound Total Return Since Inception Periods Ended 8/31/17 1 Year 5 Years 10 Years Inception Date Virginia Tax-Free Bond Fund 0.24% 3.02% 4.50% Virginia Tax-Free Bond Fund I Class 1.32% 7/6/17 This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. When assessing performance, investors should consider both short- and long-term returns. 13

16 Fund Expense Example As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period. Please note that the fund has two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and the I Class shares are also available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table. Actual Expenses The first line of the following table (Actual) provides information about actual account values and expenses based on the fund s actual returns. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading Expenses Paid During Period to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Personal Services or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $250,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher. 14

17 Fund Expense Example (continued) Virginia Tax-Free Bond Fund Beginning Ending Expenses Paid Account Value Account Value During Period 3/1/17 8/31/17 3/1/17 to 8/31/17 1 Investor Class Actual $1, $1, $2.51 Hypothetical (assumes 5% return before expenses) 1, , /7/17 2 8/31/17 7/7/17 to 8/31/17 2,3 I Class Actual 1, , /1/17 2 8/31/17 3/1/17 to 8/31/17 2,4 Hypothetical (assumes 5% return before expenses) 1, , Expenses are equal to the class s annualized expense ratio for the 6-month period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.49%. 2 The actual expense example is based on the period since the class s start of operations on 7/7/17, one day after inception; the hypothetical expense example is based on the half-year period beginning 3/1/17, as required by the SEC. 3 Expenses are equal to the class s annualized expense ratio for the period, multiplied by the average account value over the period, multiplied by the number of days in the period (56), and divided by the days in the year (365) to reflect the period since the class s start of operations. The annualized expense ratio of the I Class was 0.44%. 4 Expenses are equal to the class s annualized expense ratio for the period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the I Class was 0.44%. 15

18 Quarter-End Returns Periods Ended 6/30/17 1 Year 5 Years 10 Years Virginia Tax-Free Bond Fund -0.91% 3.16% 4.37% Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at or, for I Class shares, This table provides returns net of expenses through the most recent calendar quarter-end rather than through the end of the fund s fiscal period. It shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. Expense Ratio Virginia Tax-Free Bond Fund 0.47% Virginia Tax-Free Bond Fund I Class 0.45 The expense ratio shown is as of the fund s fiscal year ended 2/28/17. The expense ratio shown for the Virginia Tax-Free Bond Fund I Class is estimated as of the class s inception date of 7/6/17. This number may vary from the expense ratio shown elsewhere in this report because it is based on a different time period and, if applicable, includes acquired fund fees and expenses but does not include fee or expense waivers. 16

19 Unaudited Financial Highlights For a share outstanding throughout each period Investor Class 6 Months Ended 8/31/17 Year Ended 2/28/17 2/29/16 2/28/15 2/28/14 2/28/13 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.19 (2) Net realized and unrealized gain / loss 0.18 (0.31) (0.56) 0.20 Total from investment activities (0.13) 0.63 Distributions Net investment income (0.19) (0.38) (0.41) (0.41) (0.43) (0.42) Net realized gain (3) Total distributions (0.19) (0.38) (0.41) (0.41) (0.43) (0.42) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (4) 3.14% (2) 0.56% 3.67% 6.97% (0.99)% 5.32% Ratio of total expenses to average net assets 0.49% (2)(5) 0.47% 0.47% 0.47% 0.48% 0.47% Ratio of net investment income to average net assets 3.16% (2)(5) 3.13% 3.36% 3.42% 3.64% 3.48% Portfolio turnover rate 4.9% 11.8% 11.0% 6.2% 9.6% 11.7% Net assets, end of period (in millions) $ 1,220 $ 1,178 $ 1,131 $ 1,000 $ 906 $ 1,030 (1) Per share amounts calculated using average shares outstanding method. (2) Excludes expenses waived related to the waiver of fund-level expenses ratably across all classes in accordance with SEC rules. (3) Amounts round to less than $0.01 per share. (4) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. (5) Annualized The accompanying notes are an integral part of these financial statements. 17

20 Unaudited Financial Highlights For a share outstanding throughout the period I Class 7/6/17 (1) Through 8/31/17 NET ASSET VALUE Beginning of period $ Investment activities Net investment income (2) 0.06 (3) Net realized and unrealized gain / loss 0.10 Total from investment activities 0.16 Distributions Net investment income (0.06) Net realized gain Total distributions (0.06) NET ASSET VALUE End of period $ Ratios/Supplemental Data Total return (4) 1.32% (3) Ratio of total expenses to average net assets 0.44% (3)(5) Ratio of net investment income to average net assets 3.14% (3)(5) Portfolio turnover rate 4.9% Net assets, end of period (in thousands) $ 4,835 (1) Inception date (2) Per share amounts calculated using average shares outstanding method. (3) See Note 5. Excludes expenses waived (0.01% of average net assets) related to the contractual operating expense limitation in effect through 6/30/19. (4) Total return reflects the rate that an investor would have earned on an investment in the fund during the period, assuming reinvestment of all distributions. Total Return is not annualized for periods less than one year. (5) Annualized The accompanying notes are an integral part of these financial statements. 18

21 Unaudited August 31, 2017 Portfolio of Investments Par/Shares $ Value (Amounts in 000s) MUNICIPAL SECURITIES 98.8% VIRGINIA 87.8% Albemarle County Economic Dev. Auth., Westminster- Canterbury Blue Ridge, Series A, 4.625%, 1/1/32 3,500 3,546 Albemarle County Economic Dev. Auth., Westminster- Canterbury Blue Ridge, Series A, 5.00%, 1/1/42 3,200 3,283 Alexandria IDA, Episcopal High School, 4.00%, 1/1/ Alexandria IDA, Episcopal High School, 4.00%, 1/1/ Alexandria IDA, Episcopal High School, 4.00%, 1/1/ Alexandria IDA, Episcopal High School, 4.00%, 1/1/35 1,500 1,589 Alexandria IDA, Episcopal High School, 4.00%, 1/1/36 1,000 1,067 Alexandria IDA, Episcopal High School, 4.00%, 1/1/40 2,500 2,644 Alexandria IDA, Episcopal High School, 4.50%, 1/1/33 3,610 3,853 Alexandria IDA, Episcopal High School, Series A 4.75%, 1/1/36 (Prerefunded 1/1/20) (1) 1,450 1,577 Alexandria IDA, Episcopal High School, Series A 5.00%, 1/1/40 (Prerefunded 1/1/20) (1) 2,920 3,192 Alexandria IDA, Goodwin House, 5.00%, 10/1/35 1,845 2,071 Alexandria IDA, Goodwin House, 5.00%, 10/1/45 6,500 7,181 Arlington County, Series A, GO, 5.00%, 8/15/32 1,555 1,896 Arlington County, Series A, GO, 5.00%, 8/15/34 1,500 1,814 Arlington County IDA, Virginia Hosp. Center, 5.00%, 7/1/31 8,640 9,261 Botetout County, Glebe, Residential Care, Series A 6.00%, 7/1/ Botetout County, Glebe, Residential Care, Series A 6.00%, 7/1/44 3,000 3,235 Capital Region Airport Commission, Series A, 4.00%, 7/1/ Capital Region Airport Commission, Series A, 4.00%, 7/1/20 1,160 1,250 Capital Region Airport Commission, Series A, 4.00%, 7/1/24 1,000 1,119 Capital Region Airport Commission, Series A, 4.00%, 7/1/ Capital Region Airport Commission, Series A, 4.00%, 7/1/ Capital Region Airport Commission, Series A, 4.00%, 7/1/

22 (Amounts in 000s) Par/Shares $ Value Capital Region Airport Commission, Series A, 4.00%, 7/1/ Capital Region Airport Commission, Series A, 4.25%, 7/1/ Capital Region Airport Commission, Series A, 5.00%, 7/1/ Capital Region Airport Commission, Series A, 5.00%, 7/1/ ,179 Capital Region Airport Commission, Series A, 5.00%, 7/1/ Capital Region Airport Commission, Series A, 5.00%, 7/1/ Cherry Hill CDA, Potomac Shores, 4.50%, 3/1/25 (2) Cherry Hill CDA, Potomac Shores, 5.15%, 3/1/35 (2) 1,125 1,166 Cherry Hill CDA, Potomac Shores, 5.40%, 3/1/45 (2) 2,200 2,298 Chesapeake Bay Bridge & Tunnel Dist., 5.00%, 7/1/46 7,060 7,979 Chesapeake Bay Bridge & Tunnel Dist., 5.00%, 7/1/51 5,895 6,628 Chesapeake Bay Bridge & Tunnel Dist., 5.50%, 7/1/25 (3)(4) 6,235 7,729 Chesapeake Toll Road, Series B, STEP, 0.00%, 7/15/40 3,875 3,207 Chesterfield County, Public Improvement, 5.00%, 1/1/25 (Prerefunded 1/1/18) (1) 3,750 3,803 Chesterfield County Economic Dev. Auth., Bon Secours Health Series C1, 5.00%, 11/1/42 (5) 7,640 8,276 Chesterfield County Economic Dev. Auth., Virginia Electric & Power, Series A, PCR, 5.00%, 5/1/23 4,930 5,263 Fairfax County, Public Improvement, Series A, GO 5.00%, 10/1/35 6,000 7,183 Fairfax County, Sewer Revenue, 5.00%, 7/15/40 10,810 13,014 Fairfax County Economic Dev. Auth., Goodwin House 5.00%, 10/1/36 6,460 7,238 Fairfax County Economic Dev. Auth., Goodwin House 5.00%, 10/1/42 4,350 4,830 Fairfax County Economic Dev. Auth., Goodwin House 5.125%, 10/1/37 (Prerefunded 10/1/17) (1) 8,250 8,280 Fairfax County Economic Dev. Auth., Metrorail Parking 5.00%, 4/1/42 9,000 10,613 Fairfax County Economic Dev. Auth., Silver Line Phase I 4.00%, 4/1/34 8,000 8,683 20

23 (Amounts in 000s) Par/Shares $ Value Fairfax County Economic Dev. Auth., Silver Line Phase I 4.00%, 4/1/35 5,765 6,230 Fairfax County Economic Dev. Auth., Silver Line Phase I 5.00%, 4/1/29 (Prerefunded 4/1/20) (1) 1,390 1,534 Fairfax County Economic Dev. Auth., Silver Line Phase I 5.00%, 4/1/30 (Prerefunded 4/1/20) (1) 1,815 2,003 Fairfax County Economic Dev. Auth., Silver Line Phase I 5.00%, 4/1/36 (Prerefunded 4/1/20) (1) 12,650 13,961 Fairfax County Economic Dev. Auth., Special Project Route %, 4/1/36 (Prerefunded 4/1/18) (1) 4,550 4,649 Fairfax County Economic Dev. Auth., Vinson Hall, Series A 4.50%, 12/1/32 1,000 1,032 Fairfax County Economic Dev. Auth., Vinson Hall, Series A 5.00%, 12/1/47 4,000 4,199 Fairfax County IDA, Inova Health, 5.00%, 5/15/37 1,465 1,644 Fairfax County IDA, Inova Health, Series A, 5.00%, 5/15/40 26,785 29,967 Fairfax County IDA, Inova Health, Series A, 5.00%, 5/15/44 13,020 14,760 Fairfax County IDA, Inova Health, Series A, 5.50%, 5/15/35 6,490 6,945 Fairfax County IDA, Inova Health, Series A, 5.50% 5/15/35 (Prerefunded 5/15/19) (1) 3,535 3,812 Fairfax County IDA, Inova Health, Series C, 5.00%, 5/15/25 2,750 2,937 Fairfax County IDA, Inova Health, Series D, 5.00%, 5/15/28 3,000 3,451 Fairfax County Redev. & Housing Auth., 5.00%, 10/1/39 3,515 3,759 Fairfax County Water Auth., 5.00%, 4/1/44 4,720 5,631 Fairfax County Water Auth., 5.00%, 4/1/45 9,230 11,003 Fairfax County Water Auth., Series B, 4.00%, 4/1/29 3,925 4,206 Fauquier County IDA, Fauquier Hosp., Series A, 5.25%, 10/1/37 (Prerefunded 10/1/17) (1) Fauquier County IDA, Fauquier Hosp., Series B, 5.00%, 10/1/27 (Prerefunded 10/1/17) (1) Fauquier County IDA, Fauquier Hosp., Series B, 5.25%, 10/1/37 (Prerefunded 10/1/17) (1) 2,670 2,680 Fredericksburg, Series A, GO, 4.75%, 7/15/37 7,790 8,445 21

24 (Amounts in 000s) Par/Shares $ Value Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.00%, 6/15/29 1,600 1,805 Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.00%, 6/15/ Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.00%, 6/15/33 1,250 1,389 Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.25%, 6/15/19 2,875 3,037 Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.25%, 6/15/21 2,345 2,599 Fredericksburg Economic Dev. Auth., Mary Washington Healthcare, Medicorp Health, 5.25%, 6/15/23 2,600 2,986 Greater Richmond Convention Center, Hotel Tax 5.00%, 6/15/29 3,750 4,398 Greater Richmond Convention Center, Hotel Tax 5.00%, 6/15/30 1,500 1,747 Greater Richmond Convention Center, Hotel Tax 5.00%, 6/15/31 2,000 2,317 Greater Richmond Convention Center, Hotel Tax 5.00%, 6/15/32 5,630 6,500 Hampton Roads Sanitation Dist., Wastewater, 5.00%, 4/1/26 (Prerefunded 4/1/18) (1) 3,000 3,074 Hampton Roads Sanitation Dist., Wastewater, 5.00%, 4/1/28 (Prerefunded 4/1/18) (1) 6,000 6,148 Hampton Roads Sanitation Dist., Wastewater, 5.00%, 11/1/34 (Prerefunded 11/1/19) (1) 3,300 3,590 Hampton Roads Sanitation Dist., Wastewater, Series A 5.00%, 8/1/34 1,775 2,129 Hampton Roads Sanitation Dist., Wastewater, Series A 5.00%, 8/1/37 10,020 11,923 Hanover County Economic Dev. Auth., Covenant Woods Retirement Community, Series A, 5.00%, 7/1/42 1,000 1,037 Hanover County Economic Dev. Auth., Covenant Woods Retirement Community, Series A, 5.00%, 7/1/47 6,170 6,397 Hanover County IDA, Bon Secours Health, 6.375%, 8/15/18 (4)

25 (Amounts in 000s) Par/Shares $ Value Henrico County, Public Improvement, 5.00%, 12/1/25 (Prerefunded 12/1/18) (1) 1,250 1,315 Henrico County, Series A, 4.00%, 8/1/28 (Prerefunded 8/1/20) (1) Henrico County Economic Dev. Auth., Bon Secours Health 5.00%, 11/1/30 7,035 7,903 Henrico County Economic Dev. Auth., Collegiate School 4.00%, 4/15/37 4,065 4,200 Henrico County Economic Dev. Auth., Collegiate School 4.00%, 4/15/42 3,595 3,683 Henrico County Economic Dev. Auth., Collegiate School 5.25%, 4/15/32 4,350 4,618 Henrico County IDA, Bon Secours Health, 6.25%, 8/15/20 (4) 1,350 1,465 Henrico County Water & Sewer, 4.75%, 5/1/27 (Prerefunded 5/1/19) (1) 4,535 4,828 Henrico County Water & Sewer, 5.00%, 5/1/46 11,220 13,164 Hopewell IDA, Smurfit-Stone Container, EC, 5.25%, 6/1/49 (6) 2,000 1 Isle of Wight County, GO, 5.00%, 7/1/43 3,290 3,754 James City County Economic Dev. Auth., Windsormeade, United Methodist Homes, Series A, 2.00%, 10/1/48 (7) James City County Economic Dev. Auth., Windsormeade, United Methodist Homes, Series A, 6.00%, 6/1/43 2,423 2,256 Lexington IDA, Kendal at Lexington, 4.00%, 1/1/ Lexington IDA, V.M.I. Dev. Board, 4.00%, 12/1/30 2,835 3,148 Lexington IDA, V.M.I. Dev. Board, Series C, 5.00%, 12/1/36 6,325 6,782 Lexington IDA, Washington & Lee Univ., 4.75%, 1/1/43 1,225 1,325 Lexington IDA, Washington & Lee Univ., 5.00%, 1/1/43 6,725 7,579 Lynchburg Economic Dev. Auth., Centra Health Series A, 5.00%, 1/1/47 4,500 5,091 Lynchburg Economic Dev. Auth., Centra Health Series B, VRDN, 0.78%, 1/1/ Manassas Park Economic Dev. Auth., Series A 5.00%, 7/15/20 (3)

26 (Amounts in 000s) Par/Shares $ Value Manassas Park Economic Dev. Auth., Series A 6.00%, 7/15/35 (Prerefunded 7/15/20) (1) 3,495 3,980 Montgomery County Economic Dev. Auth., Virginia Tech Foundation Series A, 4.00%, 6/1/ New Port CDA, Special Assessment, 5.60%, 9/1/36 (6)(7) Newport News, Water Revenue, 5.00%, 7/15/32 1,260 1,523 Newport News Economic Dev. Auth., Lifespire Residential Facilities, 5.00%, 12/1/38 2,500 2,660 Norfolk, Series A, GO, 5.00%, 10/1/41 1,050 1,239 Norfolk, Series A, GO, 5.00%, 10/1/46 2,300 2,699 Norfolk Airport Auth., Series A, 5.00%, 7/1/20 1,385 1,512 Norfolk Airport Auth., Series A, 5.00%, 7/1/21 1,000 1,121 Norfolk Economic Dev. Auth., BBL ODU, Series A 6.00%, 11/1/36 (8) 1,410 1,303 Norfolk Economic Dev. Auth., Sentara Health Care, Series B 5.00%, 11/1/43 5,575 6,249 Norfolk Redev. & Housing Auth., Harbors Edge Retirement Community, 5.375%, 1/1/35 3,620 3,778 Norfolk Redev. & Housing Auth., Harbors Edge Retirement Community, 5.375%, 1/1/ Norfolk Water Revenue, 5.00%, 11/1/28 1,730 1,999 Norfolk Water Revenue, 5.00%, 11/1/29 1,145 1,325 Norfolk Water Revenue, 5.00%, 11/1/31 1,035 1,173 Norfolk Water Revenue, 5.00%, 11/1/38 2,805 3,140 Norfolk Water Revenue, 5.00%, 11/1/42 12,735 14,242 Norfolk Water Revenue, Series A, 5.25%, 11/1/44 17,250 20,644 Pittsylvania County, Series B, 5.75%, 2/1/30 (Prerefunded 2/1/19) (1) 1,500 1,604 Portsmouth, Series B, 5.25%, 7/15/21 (Prerefunded 7/15/19) (1) Portsmouth, Series B, 5.25%, 7/15/22 (Prerefunded 7/15/19) (1)

27 (Amounts in 000s) Par/Shares $ Value Portsmouth, Series B, 5.25%, 7/15/24 (Prerefunded 7/15/19) (1) Portsmouth, Series B, 5.25%, 7/15/25 (Prerefunded 7/15/19) (1) Portsmouth, Series B, GO, 5.25%, 7/15/ Portsmouth, Series B, GO, 5.25%, 7/15/ Portsmouth, Series B, GO, 5.25%, 7/15/ Portsmouth, Series B, GO, 5.25%, 7/15/ Powhatan County, GO, 5.00%, 1/15/32 2,000 2,158 Prince William County IDA, Novant Health, Series B 4.00%, 11/1/33 7,660 8,065 Prince William County IDA, Westminster Presbyterian at Lake Ridge, 5.00%, 1/1/37 1,000 1,083 Prince William County IDA, Westminster Presbyterian at Lake Ridge, 5.00%, 1/1/46 4,025 4,310 Richmond, Public Utilities, 5.00%, 1/15/28 (Prerefunded 1/15/19) (1) 1,000 1,057 Richmond, Public Utilities, 5.00%, 1/15/40 (Prerefunded 1/15/19) (1) 10,150 10,727 Richmond Metropolitan Auth., 5.25%, 7/15/22 (3)(9) 1,740 1,933 Richmond Metropolitan Auth., Unrefunded Balance 5.25%, 7/15/22 (9) 10,615 11,739 Richmond Metropolitan Auth., 5.25%, 7/15/22 (9) 3,000 3,339 Riverside Regional Jail Auth., 5.00%, 7/1/30 5,770 6,806 Roanoke Economic Dev. Auth., Brandon Oaks 6.625%, 12/1/44 3,900 4,183 Roanoke Economic Dev. Auth., Carilion Clinic, 5.00%, 7/1/33 4,970 5,381 Roanoke Economic Dev. Auth., Carilion Clinic, Series C 5.00%, 7/1/27 (5) 4,250 4,608 Russell County IDA, Appalachian Power, Series K PCR, 4.625%, 11/1/21 10,520 11,327 Suffolk Economic Dev. Auth., United Church, 5.00%, 9/1/31 4,000 4,344 25

28 (Amounts in 000s) Par/Shares $ Value Tobacco Settlement Fin. Corp., Tobacco Industry, Series B1 5.00%, 6/1/47 3,025 2,890 Univ. of Virginia, 5.00%, 6/1/40 (Prerefunded 6/1/18) (1) 9,655 9,961 Univ. of Virginia, Green Bond, Series A-2, 5.00%, 4/1/45 20,705 24,213 Univ. of Virginia, Series A, 5.00%, 4/1/42 5,000 5,998 Univ. of Virginia, Series A, 5.00%, 6/1/43 3,440 4,008 Univ. of Virginia, Series B, 5.00%, 4/1/46 5,000 5,956 Upper Occoquan Sewage Auth., 4.00%, 7/1/34 5,515 6,022 Upper Occoquan Sewage Auth., 4.00%, 7/1/40 10,805 11,624 Upper Occoquan Sewage Auth., Series B, 4.00%, 7/1/37 6,655 7,195 Virginia, Series B, 5.00%, 6/1/27 (Prerefunded 6/1/18) (1) 2,000 2,063 Virginia, Series B, 5.00%, 6/1/30 (Prerefunded 6/1/18) (1) Virginia College Building Auth., 21st Century, 4.00%, 2/1/34 4,500 4,837 Virginia College Building Auth., 21st Century, 4.75%, 2/1/27 (Prerefunded 2/1/18) (1) 6,810 6,923 Virginia College Building Auth., 21st Century, 4.75%, 2/1/29 (Prerefunded 2/1/18) (1) 2,050 2,163 Virginia College Building Auth., 21st Century, 5.00%, 2/1/26 (Prerefunded 2/1/19) (1) 1,860 1,969 Virginia College Building Auth., 21st Century, 5.00%, 2/1/29 (Prerefunded 2/1/19) (1) 3,000 3,176 Virginia College Building Auth., Public Higher Ed. Fin. Program 5.00%, 9/1/29 (Prerefunded 9/1/19) (1) 10,000 10,818 Virginia College Building Auth., Public Higher Ed. Fin. Program Series A, 5.00%, 9/1/18 7,460 7,774 Virginia College Building Auth., Public Higher Ed. Fin. Program Series A, 5.00%, 9/1/26 (Prerefunded 9/1/18) (1) 5,455 5,684 Virginia College Building Auth., Public Higher Ed. Fin. Program Series A, 5.00%, 9/1/26 (Prerefunded 9/1/18) (1) Virginia College Building Auth., Public Higher Ed. Fin. Program Series A, 5.00%, 9/1/28 (Prerefunded 9/1/18) (1) 5,955 6,205 Virginia College Building Auth., Public Higher Ed. Fin. Program Series A, 5.00%, 9/1/28 (Prerefunded 9/1/18) (1)